HBA-DMD H.B. 1687 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 1687
By: Hunter
State, Federal, & International Relations
3/18/1999
Introduced



BACKGROUND AND PURPOSE 

Texas does not currently offer a reliable ongoing financial infrastructure
for the film industry. Without such, the state's ability to develop its
film industry may be limited. H.B. 1687 establishes the Texas film industry
development loan guarantee fund. This bill requires the Texas Department of
Economic Development to establish a loan guarantee program which guarantees
loans for Texas films made by Texas film producers. This bill also
establishes a guarantee fee that the producer must pay the department
before the issuance of a loan guarantee. Additionally, this bill requires
the department to require the film producer to provide an indemnity
insurance policy worth at least 80 percent of the loan guarantee. H.B. 1687
prohibits more than $50 million of guarantees from being outstanding at any
one time. This bill also subjects the Texas film industry development loan
guarantee program to the Texas Sunset Act.  

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the Texas Department of Economic
Development in SECTION 1 (Section 481.611, Government Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 481, Government Code, by adding Subchapter CC,
as follows: 

SUBCHAPTER CC.  TEXAS FILM INDUSTRY DEVELOPMENT
LOAN GUARANTEE PROGRAM

Sec. 481.601. DEFINITIONS. Defines "eligible Texas film," "filmed
entertainment," "production costs," "program," "Texas derivation," "Texas
film," "Texas film producer," and "Texas lender." 

Sec. 481.602. LIBERAL CONSTRUCTION. Requires this subchapter to be
liberally construed to accomplish the purposes stated in this subchapter. 

Sec. 481.603. TEXAS FILM INDUSTRY DEVELOPMENT LOAN GUARANTEE FUND.
Establishes the Texas film industry development loan guarantee fund (fund)
as a dedicated account in the general revenue fund. Specifies amounts to be
deposited in the fund. Authorizes money in the fund to be used only for the
purposes of this subchapter. Provides that Section 403.095 (Use of
Dedicated Revenue), Government Code, does not apply to the fund. 

Sec. 481.604. TEXAS FILM INDUSTRY DEVELOPMENT LOAN GUARANTEE PROGRAM.
Requires the Texas Department of Economic Development (department) to
establish a loan guarantee program (program) to guarantee a certain amount
of one or  more qualified Texas film production loans as a means to
facilitate access to capital for the production of filmed entertainment in
this state. Authorizes the department to guarantee a qualified Texas film
production loan or loans for the production of more than one Texas film by
a single Texas film producer. 

 (b) Prohibits the department from making a Texas film industry loan
guarantee (loan guarantee) unless a Texas lender has approved a qualified
application submitted by a Texas film producer to make a qualified Texas
film production loan to the producer.  

(c) Requires the department, for each guarantee, to determine the maximum
guarantee amounts, the terms and conditions relating to a guarantee, and
specifically provide that an action or claim under the guarantee must be
brought no later than the third anniversary of the date on which the
department issues the guarantee.  

(d) Prohibits the guarantee amount provided by the department under this
subchapter from exceeding 80 percent of the total amount of the Texas film
production loan, or $2.4 million, whichever is less.  

Sec. 481.605.  QUALIFIED TEXAS FILM PRODUCTION LOAN. Sets qualifications
for a Texas film production loan.  

Sec. 481.606.  APPLICATION FOR LOAN GUARANTEE.  (a) Sets guidelines for a
loan guarantee application (application). 

(b) Requires the department to charge a reasonable application fee not to
exceed $100 in order to cover the cost of processing the application.  

(c) Requires the department, upon receiving an application, to verify the
information contained in the application. Authorizes the department to
conduct investigations as necessary to make a determination regarding
information provided in the application.  

(d) Authorizes the department to contract with a private company to verify
the information in the application by conducting an investigation and to
submit a written report of the company's findings to the department.  

(e) Prohibits the department from approving an application unless it is
complete and meets the requirements of this section.  

Sec. 481.607.  GUARANTEE FEE. Requires the producer of a film, for each
film to be produced with the proceeds acquired with the assistance of a
loan guarantee, to pay to the department a guarantee fee in an amount equal
to two percent of the budget for the total cost to produce the Texas film.
Provides that the fee must be paid in full before the date on which the
department issues the loan guarantee.  

Sec. 481.608.  INDEMNITY POLICY. Requires the department, for each film to
be produced with the proceeds acquired with the assistance of a loan
guarantee, to require the producer of the film to provide an indemnity
insurance policy worth at least 80 percent of the loan guarantee. Provides
that the insurance policy must be issued to the department as the insured
party by an insurance company authorized to do business in this state.  

Sec. 481.609.  SURETY BOND FOR COMPLETION OF FILM. Requires the department,
as a condition of receiving a loan guarantee, to require an applicant to
file a surety bond indemnifying this state, the lender, and the insurance
company providing indemnity insurance under Section 481.608 against loss
that results from the film not being completed by the date and for the
budget certified to the state in the application required by Section
481.606.  

Sec. 481.610.  ISSUANCE OF LOAN GUARANTEE. Prohibits the department from
issuing a loan guarantee unless the loan guarantee meets certain criteria.  

Sec. 481.611.  RULEMAKING AUTHORITY. Requires the department to adopt rules
relating to the implementation of the program and any other rules necessary
to accomplish the purposes of this subchapter. Provides that the rules must
include: 

 (1)  terms and conditions for a security interest or other pledge of
collateral to be provided to a lender or this state as security for any
default of a loan guaranteed under the program; and 
(2)  procedures for the enforcement of obligations owed and pledge of
collateral provided to the department under the program.  

Sec. 481.612.  OFFENSE. Provides that a person commits a third degree
felony offense if the person signs an application or submits to the
department a document the person knows is false in any material respect
with the intent of causing the department to issue a loan guarantee under
the program.  

Sec. 481.613.  LIMITATIONS IN PROGRAM. Prohibits more than $50 million of
guarantees issued from being outstanding at any one time.  

Sec. 481.614.  QUARTERLY REPORT. Requires the department, at least
quarterly, to provide to the comptroller, the director of the Legislative
Budget Board, the presiding officer of the Senate Finance Committee, and
the presiding officer of the House Appropriations Committee a report that
contains: 

(1)  the names and addresses of the Texas film producers that have applied
to the department for, and the Texas lenders that would benefit from, a
loan guarantee under the program; 
(2)  the names and addresses of the Texas film producers and their
respective Texas lenders that have been approved to receive a loan
guarantee under the program; 
(3)  the amount of the loan guarantee issued by the department to each
applicant described by Subdivision (2); and 
(4)  any other information relating to the program that may be requested to
be included in the report.  

Sec. 481.615.  GIFTS AND GRANTS. Authorizes the department to solicit and
accept gifts, grants, and donations from any source for the purposes of
this subchapter.  

Sec. 481.616.  APPLICATION OF SUNSET ACT TO PROGRAM.  (a) Subjects the
program to Chapter 325 (Texas Sunset Act), Government Code,  as if it were
a state agency subject to review under that chapter. Provides that this
program is abolished and this subchapter expires on September 1, 2005, if
it is not continued in existence in accordance with that chapter. 

(b) Requires the department, to the extent that Chapter 325 (Texas Sunset
Act), Government Code, places a duty on a state agency subject to review
under that chapter, to perform the duty as it relates to the program.  

SECTION 2.  Subchapter B, Chapter 481, Government Code, is amended by
adding Section 481.030, as follows: 

Sec. 481.030.  TRANSFER OF CERTAIN MONEY TO GENERAL REVENUE FUND. Sets
forth that on the expiration of Subchapter CC: 

(1)  the department is required to compute the amount sufficient to cover
loan guarantees or other obligations of the department that remain
outstanding under the program; and 
(2)  authorizes any amount in the fund that exceeds the amount computed
under Subdivision (1) to be used only by the Music, Film, Television, and
Multimedia Office in the governor's office for the purpose of promoting the
film industry in this state.  

SECTION 3. Requires the department to adopt rules required by Section
481.611, Government Code, as added by this Act, no later than December 1,
1999.  

SECTION 4.Effective date: September 1, 1999.  
 
SECTION 5.Emergency clause.